Freedom, flexibility, control over your time, ability to serve others without the need to be well-compensated. These are a few of the goals for financial independence that you hear when talking to people who desire to not be tied to their paycheck.
One of the simplest actions that can be taken to move you in the direction of a life where you can pursue the most important things is to start investing early. Very early is even better.
Unfortunately, you are stuck with me as your father, which means you will likely get sick of me talking about good money habits throughout your life. However, the upside to this is that I have already started investing for you. I have seen the incredible power of compounding growth and I plan to help you take full advantage of all of your investing years, even as an eight month old.
Einstein has often been attributed with the quote, “Compound interest is the eighth wonder of the world.” Who knows if he actually said this, but whether he did or not, does not make it any less true. Let’s assume a retirement age of 65 (later than I would recommend for financial independence but it is the typical American time frame), investing $500/month (lower than I would recommend but that is a discussion for a future letter), assuming a 7% growth rate. If you start at age 30, your portfolio ends up being $900,000. If you start ten years earlier at age 20, your portfolio ends up being $1.9 million!
Time is not something to be taken lightly when investing for the future. It is not about hoarding as much money as possible. It is about being the best possible steward of your time and resources. By saying, “I will start next year” you are not being the best steward you can be. Also, starting late is not an excuse to give up or not start today. As the saying goes, “The best time to start investing was 20 years ago. The second best time is today.”
Starting early, with any amount is simply the easiest and cheapest way to provide for the uncertainty of the future. It is a way to alleviate one of the greatest stresses that I see in clients lives as they get older. Ask nearly anyone nearing retirement and they will all say they wish they had started earlier.
My desire is that when life throws many unexpected twists and turns your way, money would not be one of them, or at least be very minor. This will allow you apply all of yourself to the challenges at hand without the looming stress of money.